2009

GENERAL
PRECEPTION OF
FATWA AND ITS
ROLE IN ISLAMIC
FINANCE
INCEIF
ISLAMIC JURISPRUDENCE AND LEGAL MAXIMS

BY
MUGHEES SHAUKAT[ 0801014]
22/04/2009
,INCEIF the Global University in Islamic Finance
Kuala Lumpur, Malaysia
MIF/PhD Program

Fatwa

Islamic Jurisprudence and Legal Maxims

CODE: FQ 6113/5113

MUGHEES SHAUKAT
Student ID # 0801014

2
 ACKNOWLEDGEMENT

First, praise is due to Allah who made it possible for the completion of this essay writing. Secondly I

would like to extend my thanks to INCEIF KMC team, who gave me a great support in using the

library facilities, and also I am grateful to all the colleagues who helped me with references for the

collection of the essay topics. Finally, I thank to our teacher Prof. Dr. HASAN LAHSASNA

3
 Contents

Abstract
Introduction

1. Meaning of fatwa

2.1 History of fatwa in Islam.

2.2 Fatwa of Sahaba (companion of the Prophet, )

2.3 Contemporary Trends

2.4 Scope of Fatwa

2.5. Characteristics of fatwa in Islamic

2.6 Legal implications of a fatwa

3. Islamic Schools of law their Methodology of fatwa and its development

3.1. Maliki School of law

3.1.1. The Maliki School its Methodology and Development of fatwa

3.2. Shafai School of law

3.3. Hanafi School of law

3.4. Hanbali School of law

3.5. Imam Al Shawqani (as independent scholar)

3.5.1. Methodology of his fatwa

3.5.2. Technical approach in his fatwa

4. Fatwa in Islamic finance

4.1 Importance of fatwa and its roles in Islamic banking and finance

4
4.2. Methodology of fatwa in Islamic finance:

4.3. Some rules governing the fatwa and the mufti in Islamic finance

5. Fatwa issued by Shariah board or advisory Shariah council.

5.1. The area covered by Shariah advisory

5.2. Duties and responsibility of Shariah committee

Key Terms
References

5
 Abstract
In the technical language of Shari`ah, the word fatwa clarifies the Islamic ruling in an answer given
to question or a set of questions usually related to an Islamic issue. It does not make any difference
whether the questioner is a person or a group of persons. It stands to reason that fatwa is not an easy
task, but rather an arduous one. This is because the one who commits himself to issuing fatwas acts
on behalf of Allah's Messengers and Prophets. The Prophet (peace and blessings be upon him) is
reported to have said: "Scholars are the heirs of Prophets, and Prophets neither left behind
dinars nor dirhams (Arab coins); rather they left knowledge. He who acquires knowledge has
really gained something of great value." This paper will not only explore the meaning and
perception of fatwa as a whole but would also link and reflect on its influence, bearings and links to
Islamic finance.

6
Introduction

Fatwa has a very important role in Islamic law and jurisprudence and Islamic finance. Now a Days
Fatwa has been given a very important position in Islamic Finance Industry, Shariah advisors are
practicing as an independent body with the responsibility of issuing Shariah Rulings or fatwa to the
various issues in the Islamic banking and finance industry.

The first legal rulings were issued by the Prophet in his role as intermediary between God and the
Muslims. Fatwa is one of the noble tasks of Prophethood that has been known throughout the history
of mankind. Due to the critical position of fatwa competent scholars fear from it and prefer not to get
involved in its process due to the implications on human life.

The Practical implications of fatwa in Islamic finance are evident in the daily business operations of
Islamic banks and Islamic financial institutions. There are several fatawa in Islamic finance issued by
competent scholars in various areas of Islamic banking and finance; these are issued through Shariah
board, individually or through collective ijtihad and fatwa; by fiqh academy or Shariah council.
Islamic finance today had shown fast growth and development in the critical role of fatwa in the
Islamic financial system.

1. Meaning of fatwa

A fatwa (Arabic: ‫ ;فتوى‬plural fatawa Arabic: ‫)فتاوى‬, in the Islamic faith is a religious opinion on
Islamic law issued by an Islamic scholar. In Sunni Islam any fatwa is non-binding, whereas in Shia
Islam it could be, depending on the status of the scholar.

Fatwa is derived from the root fata, which includes in its semantic field the meanings “youth,
newness, clarification, explanation.” In the Qur'an, the term is used in two verbal forms meaning
“asking for a definitive answer,” and “giving a definitive answer” (4.127, 176), although neither
passage has a binding clause. Consequently, the concept of fatwa in early Islam developed in the
framework of a question‐and‐answer process to better communicate on religious matters. Its subject
was ῾ilm (knowledge) without further specification. Later, when ῾ilm was identified with ḥadith
(sayings of the Prophet , which are divided into two parts, the matn (text) and the isnad (chain of
reporters to verify authenticity)), Fatwa came to be associated with ra'y (opinion) and fiqh
(jurisprudence). After a corpus of legal definitions emerged, the term followed madrasah (religious
school) interpretations, especially when fiqh did not provide clear technical assessments.

In the early days of Islam, fatwa were pronounced by distinguished scholars to provide guidance to

7
other scholars, judges and citizens on how subtle points of Islamic law should be understood,
interpreted or applied. There were strict rules on who is eligible to issue a valid fatwa and who could
not, as well as on the conditions the fatwa must satisfy to be valid.

2.1 History of fatwa in Islam.

The first legal rulings were issued by the Prophet in his role as intermediary between God and the
Muslims. The form in which these legal commands were revealed takes into account the fact that the
Islamic model instituted by the Prophet reflected, in some respects, a drastic departure from
previous Arab customs while in other areas, the Islamic response built upon existing customary
practices. Because of this relationship between pre-Islamic customs and the new Islamic legal
structure, many Qur'anic legal commands were revealed as a result of individual members of the
Prophet's ( ) community approaching him for "clarification regarding the continuing validity of a
certain practice."

After the Prophet's death, when direct access to divine revelation was no longer available,
Muslims turned to the Prophet's closest Companions for guidance. Fatawa at this point in Islamic
history took the form of the Companions commenting on how the Prophet approached a certain
issue. When the generation of the Companions died out, Muslims came to rely on hadith, which were
linked to the Prophet through their isnad. Those who mastered these hadith, the 'ulama, became in
the second Islamic century the means by which to receive religious guidance on specific issues. As
the Islamic Empire expanded and sophisticated state control became increasingly necessary, legal
scholarship as the basis of state legitimacy-took on a similarly bureaucratic nature. Whereas "fatwa
began as a private activity that was independent of state control," it became increasingly formalized,
culminating in the creation of the four Sunni madhhabs and Shi'i Jafari madhhab, each of which
compiled its own "fatwa collections."

Today, with the existence of modern independent States, each with its own legislative system, and/or
its own body of Ulemas, each country develops and applies its own rules, based on its own
interpretation of religious prescriptions. Many Muslim countries (such as Egypt and Tunisia) have an
official Mufti position; a distinguished expert in the Shariah is appointed to this position by the civil
authorities of the country.

2.2 Fatwa of Sahaba (companion of the Prophet, )

8
Fatwa (opinion or ruling) of Sahaba is indeed a very important and deserves highest consideration,
they being close to the Prophet and because of their direct knowledge from the Prophet . There is
some disagreement as to who is a Sahabi. Majority hold that anybody who met the Prophet while
believing Islam is a Sahabi. Minority hold that "Suhbat" (continuity of companionship) is a
requirement to call a person a Sahabi of the Prophet [Imam Shawkani, Irshad; also Dr. Hashim
Kamali, Principles of Islamic Jurisprudence, Islamic Texts Society, Cambridge, U.K.]. Both points of
view have justifications and cannot be ignored. The fact of being Sahabi can be established by
continuous testimony (tawatur) or by affirmation of any other companion or even by own claim (if
the person is upright).

Fatwa of Sahaba means an opinion reached by a Sahaba by way of Ijtihad. As regards whether fatwa
of Sahaba constitute a proof on succeeding generations, there are three views: First view is that - it is
an absolute proof. The proponents of this view quote the Quranic verses 9:100, 3:109. They also
quote Hadith like "my companions are like stars" or “Honour my companions". First view is held by
Imam Malik, Imam Shafii and Ahmad Bin Hanbal also have been quoted in its support. Against this
view, it has been suggested that these references speak of the status and dignity of Sahaba. These are
not categorical (Qaati) regarding compulsion to obey their decisions).

Second view is - that Ijtihad of a companion is not a proof and does not bind the succeeding
generations. Hanafi jurist Abul Hasan al Karkhi, Imam Ahmed (according to one view of him) and
Asharite and Mutazilite scholars hold this view. They quote the Quranic Ayat 59 : 2 ("Consider, O
You who have vision"). It is argued that the Ayat makes Ijtihad an obligation of all who are
competent and makes no distinction between Sahabis and others. Imam Gazali and Amidi consider it
preferred view.

Third view is that of Abu Hanifa himself. He says that ruling of a companion is a proof if it is in
conflict with Qiyas but not when it agrees with Qiyas. The aforesaid are the main views. There are
some other views which may be seen in the books of Usul.

It can be concluded that the Fatwa of a companion is a source of guidance which merits careful
consideration (though not binding except in case of their clear Ijma).

2.3 Contemporary Trends

There have been significant recent developments as to the muftī's character, the medium through
which fatawa are communicated, the types of questions posed, and the methodologies by which the

9
muftīs arrive at their answers. According to the traditional principles of Islamic jurisprudence (usūl
al‐fiqh), a muftī must acquire a high level of specialized knowledge before issuing fatawa; however,
many militant and reform movements have disseminated fatawa issued by non‐specialists which
have been widely circulated and followed.

For example, in 1998 ῾Usāma bin Lāden, together with four other associates calling themselves the
World Islamic Front, issued a fatwa calling for a “Jihād against Jews and Crusaders.” The fatwa
proclaimed it the individual duty of all Muslims to kill as many Americans as possible, including
civilians. In addition to denouncing the content of this and other fatawa attributed to bin Lāden,
many Muslim jurists have stressed bin Lāden's lack of the requisite qualifications for either issuing
fatawa or declaring jihād.

In July 2005, nearly two hundred prominent ῾ulamā' convened in Jordan to issue a ruling that
recognized the legitimacy of eight schools of Islamic law, forbade declaring any member of these
schools to be an apostate, and declared that only scholars trained according to the requirements of a
recognized school of law may issue fatawa. Known as the “Amman Message,” a major purpose of
the statement was to delegitimize the fatawa promulgated by leaders of violent Islamist movements

A fatwa issued in the aftermath of the September 11, 2001, attacks on the United States also
illustrates several recent trends in iftā'. A few days after the attacks, a Muslim chaplain in the U.S.
Army asked a group of ῾ulamā' about the permissibility of participating in a war against Muslim
countries. In response, five Middle Eastern scholars issued a joint fatwa permitting Muslim military
personnel in the U.S. armed forces to participate in actions against Muslim states. Rather than
referencing any of the major schools of Islamic law, the authors of this fatwa drew support for their
position directly from the Qur'ān and ḥadith. The collective fatwa, the lack of adherence to any one
school of law, and the incidence of questions from Western Muslims directed toward muftīs in
Muslim countries have all become common features of iftā'.

An estimated one‐third of the world's Muslims now live in majority non‐Muslim countries. The
demand for fatawa on such issues as attending church weddings, responding to a French ban on
headscarves in public schools, or buying houses through mortgages, has led to the controversial
development of what since 1994 has been termed fiqh al‐aqallīyāt, or the jurisprudence of Muslim
minorities. Organizations such as the Fiqh Council of North America, established in 1986, and the
European Council for Fatwa and Research (ECFR, http://www.e-cfr.org/ar/), founded in 1997, have
sought to provide authoritative rulings that address the concerns of minority Muslims, facilitate their

10
adherence to Islamic law, and stress the compatibility of Islam with life in diverse modern contexts.
The ECFR's international membership has adopted an explicit methodology of drawing on all four
major schools of law, as well as a range of other legal concepts, in order to produce collective fatawa
suitable for European contexts. For example, an ECFR ruling issued in 2001 allowed a female
convert to Islam to remain married to her non‐Muslim husband; the muftīs justified this stance partly
on the basis of existing European laws and customs which guarantee women the freedom of religion.
Although this type of ruling has been welcomed by many, it has been criticized by others as a
divisive system of exceptions.

Far less formal than the deliberations of the ECFR; are the fatawa, issued online by “cyber-muftis.”
Web sites such as Islam‐Online (www.islamonline.net/) and Fatwa‐Online (www.fatwa-
online.com/) are among a large number of sites offering instant fatawa to readers from all over the
world. Islam‐Online publishes a searchable archive of ‘live fatwa’ sessions, which numbered almost
a thousand in mid‐2007, and posts each muftī's biography. These sites, along with radio shows and
satellite television programs offering call‐in fatawa, have contributed to the changing, and thriving,
nature of contemporary iftā'. Muslims may now consult any number of muftīs worldwide,
anonymously, instantly, and from the comfort of their home or local Internet café.

2.4 Scope of Fatwa

Fatwa covers a wider scope, including matters of legal theory, theology, philosophy, and creeds,
which are not included in fiqh studies. Thus, the concept retains a broader concern about religion and
society than is reflected in the formal Islamic law defined by the five schools. From the perspective
of judicial authority, realm, and enforceability, fatwa is contrasted with qaḍā, or court judgment. The
jurisdiction of fatwa is wider than qaḍā; matters such as ῾ibadat (religious duties or obligations) are
excluded from the power of courts, even though they are essential parts of Islamic law and appear
very prominently in fiqh manuscripts and fatawa. The major difference between the two is in their
enforceability: qaḍā is binding and enforceable whereas fatwa is voluntary. The concept of fatwa can
therefore be seen as an indirect instrument for defining formal concepts of law when applied in
courts. From the perspective of moral and religious obligation, fatwa is contrasted with taqwā or
piety. For instance, a fatwa may allow choice between a lenient (rukhsah) and a severe (῾azimah)
view about the permissibility of a certain matter, or it may resort to legal devices (hilah) to
circumvent the strict implications of a law, but taqwā may not approve of such strategies. This last
contrast is often referred to in literary and Ṣūfī writings.

11
 2.5. Characteristics of fatwa in Islamic

Imam Ahmad (may Allah be pleased with him) said that the one nominated to hold the position of
Mufti, should possess the following characteristics:

o He should have a pure intention to guide the questioner and never to misguide him.

o He should have deep insight, equanimity and tranquility.

o He should have a firm religious background and deep knowledge.

o In his capacity as a religious leader, the Mufti should have adequate means to earn his
livelihood.

o Finally, he should be aware of daily life and contemporary issues.”

Moreover, Sheikh M. S. Al-Munajjid, a prominent Saudi Muslim lecturer and author, adds:
“Not every individual has the right to issue Fatawa and make pronouncements on matters. A Mufti
must be qualified and of profound knowledge. He has to be able to know the evidence, the wording
and apparent meaning of the texts, what is Sahih (authentic) and what is Da`if (weak), An-Nasikh
wal-Mansukh (the abrogating and the abrogated), what is specific in application and what is general,
and what is stated in brief and what is mentioned in detail.

This needs lengthy experience and practice, knowledge of the various branches of Fiqh and where to
look for information, knowledge of the opinions of the scholars and jurists, and memorization or
knowledge of the religious texts. The Mufti should be knowledgeable and rich in life experience. We
cannot imagine him to live in an ivory tower and turn a blind eye to life around him.

Undoubtedly, issuing Fatawa without having qualification to do so is a grave sin. Allah has warned
us against that, saying: "And speak not, concerning that which your own tongues qualify (as clean or
unclean), the falsehood: "This is lawful, and this is forbidden,’ so that ye invent a lie against Allah.
Lo! Those who invent a lie against Allah will not succeed.” (An-Nahl: 116)”

According to the usul al-fiqh (principles of jurisprudence), the fatwa must meet the following
conditions in order to be valid:

o The fatwa is in line with relevant legal proofs, deduced from Qur'anic verses and hadiths;

12
 provided the ahadith was not later abrogated by Muhammad.

o It is issued by a person (or a board) having due knowledge and sincerity of heart;

o It is free from individual opportunism, and not depending on political servitude;

o It is adequate with the needs of the contemporary world.

2.6 Legal implications of a fatwa

There is a binding rule that saves the fatwa pronouncements from creating judicial havoc, whether
within a Muslim country or at the level of the Islamic world in general: it is unanimously agreed that
a fatwa is only binding on its author.

Fata functioned independently of the judicial system, although in some systems muftīs who issued
decrees would be officially seconded to religious courts. Thus, in Andalusian benches muftīs sat as
mushawar (jurisconsults), and in early British Indian magistrates they sat as mawlawis (men of
learning). Jurists compiled volumes of fatawa stating, for the benefit of judges, the consensual and
authoritative views and doctrines of a particular school. Partly for these reasons, the position of
muftīs in Muslim political systems was defined by the role fiqh enacted in that society. In Andalusia,
jurists were indeed powerful, because they were part of the shūrā (council) of amīrs and caliphs,
whereas in the Ottoman and Mughal political systems, the chief muftī was designated as Shaykh al-
Islam. Muftīs were also appointed to various other positions, including market inspectors, guardians
of public morals, and advisors to governments on religious affairs.

Under colonial rule the madrasahs took over the role of muftīs as religious guides. The madrasahs
established the institution of dar al-ifta, a place to issue fatawa. The print and electronic media in the
nineteenth and twentieth centuries reinforced the role and impact of fatawa. Muftīs were faced with
day-to-day challenges in economic, political, scientific, and technological fields. Not only did the
scope of fatwa widen, but because of its instant availability to a wider public, its language,
presentation, and style adapted. Although no international Islamic authority has been established to
settle legal differences, an Islamic Fiqh Academy was created in January 1981 by the Organization of
the Islamic Conference (OIC), but its renditions are not binding.

This was underlined by Sheikh Abdul Mohsen Al-Obeikan, vice-minister of Justice of Saudi Arabia,

13
in an interview with the Arabic daily "Asharq al awsat", as recently as on July 9, 2006, in a
discussion of the legal value of a fatwā by the Islamic Fiqh Academy (IFA) on the subject of misyar
marriage, which had been rendered by IFA on April 12, 2006 .

Despite this, sometimes, even leading religious authorities and theologians misleadingly present their
fatwa as obligatory, or try to adopt some "in-between" position.

Thus, the Sheikh of Al-Azhar in Cairo, Muhammad Sayid Tantawy, who is the leading religious
authority in the Sunni Muslim establishment in Egypt, alongside the Mufti of Egypt, said the
following about fatawa issued by himself or the entire Dar al-Ifta:

"Fatwa issued by Al-Azhar are not binding, but they are not just whistling in the wind either;
individuals are free to accept them, but Islam recognizes that extenuating circumstances may prevent
it. For example, it is the right of Muslims in France who object to the law banning the veil to bring it
up to the legislative and judicial authorities. If the judiciary decides in favor of the government
because the country is secular, they would be considered to be Muslim individuals acting under
compelling circumstances." Otherwise, in his view, they would be expected to adhere to the fatwa.

In Morocco, where king Mohammed VI is also Amir al-Muminin (Commander of the faithful), the
authorities have tried to organize the field by creating a scholars' council (conseil des oulémas)
composed of Muslim scholars (ulema) which is the only one allowed to issue fatwa. In this case, a
national theocracy could in fact compel intra-national compliance with the fatwa, since a central
authority is the source. Muslims in other nations would obviously not be required to obey it.

3. Islamic Schools of law their Methodology of fatwa and its development:

There are a few methods of fatwa applied by scholars from different school of law, depending on
various approaches in Islamic jurisprudence. We elaborate very briefly on those methods according
to the popular school of law:
3.1. Maliki School of law:

Imam Malik was known as the “master” of the Hadith School and therefore the influence of hadith in
his ijtihad is very clear, and his fatwa is tradition or hadith based. Before Imam Malik gets involved
in the issuance of fatwa, he usually considers and observes few criteria in his fatwa as follows:
o ‘Farness from fatwa’, he used to say I don’t know in most of the cases subject to his ijtihad.

14
 o Thoughtfulness, slowness, careful consideration, deliberation before fatwa in order to provide
an accurate and sound Islamic ruling. This approach demonstrates the value and appreciation
given to fatwa.
o Imam Malik dislikes issuing fatwa for something which did not yet happen, i.e. Propositional
law. Usually he issues the fatwa only when it happens and becomes a real case which needs
an Islamic ruling.

3.1.1. The Maliki School its Methodology and Development of fatwa:

The criteria that have been established by the Master of the school were taken into account by his
followers and the leaders of the schools after him. Furthermore they have developed the
methodology of the fatwa in the school and established a reliable and sound source and criteria for
the fatwa in the mazhab. The major sources of Shariah in ijtihad and fatwa observed by the Maliki
School taken into consideration during the issuing of the Islamic ruling are: the Holy Quran, Hadith
Sharif (tradition of the Prophet ), ijma. (consensus of legal opinion), amal ahl al madinah (tradition
of people of Madina), fatawa of the companion of the prophet , qiyas(analogy), masaleh al
mursalah (public interest), istihsan (juristic preference), sadu darrai (blocking the lawful means to
an unlawful end), and al urf. (Custom).1
The above sources represent the major and important sources for ijtihad and fatwa in the Maliki
School. However there are some characteristics pertaining to each source which must be fulfilled to
ensure the sound approach in the interpretation of the text, or in determining the new case subject to
fatwa.
3.3. Hanafi School of law:

Abu Hanifa. the master of this school, is one of the prominent scholars recognized by this ummah,
but his methodology in fatwa and ijtihad is different from Imam malik due to the normative
influence from his intellectual environment in Iraq where the hadith was not the back bone of his
ijtihad but he depended on a rational approach and the use of the intellect and reasoning as important
sources for interpretation. The major sources in the Hanafi School taken into consideration
considered during the issuance of fatwa and Islamic ruling are: the Holy Quran, Hadith Sharif, ijma,
and selection from fatawa of the companion of the prophet , qiyas, masaleh al mursalah, al urf and
Istihsan.2

1
Husain Mohamad al malah, Al Fatwa, p. 148-160.. Moustafa Sheikh Yahi, Manhaj Fatwa Imam Malik, p. 5 - 13

15
3.4. Hanbali School of law

Imam Ahmad Ibn Hanbal is the master of the Hanbali school of law and the prominent student of
Imam Shafi, The Hanbali school took into consideration the following major sources when issuing
the Islamic ruling and they are: the Holy Quran, sunnah (hadith sharif), ijma, fatawa of the
companion of the Prophet , al ahdith al mursal (broken chain in companion) and qiyas.3 Besides
the abovementioned sources, Imam Ahmad considered other factors in his fatwa as follows:

o The changing of time and location (this factor is considered by other scholars as well).

o He is not restricted to his previous fatawa.

o He takes into account the principle of daroura.

o Observe the niyyah or intention of the person in his fatwa and the Islamic ruling can be
affected according to his intention. .

3.5. Imam Al Shawqani (as independent scholar)

Imam al Shawqani is not a master of any school of law but he is an independent jurist and a
competent scholar accepted by the ummah. By reviewing his fatawa in finance and other aspects of
Shariah we can observe some important criteria which govern his methodology in fatwa and ijtihad
as follows:

3.5.1: Methodology of his fatwa:

Shawqani has adopted some criteria in his fatwa methodology which can be summarized in the
following points:

o Refer to al dalil (evidence) and dependence on it in issuing fatwa or in supporting any

Shariah opinion.

o Independent in his ijtihad, which means that Imam Shawqani was an independent scholar in

2
Husain Mohamad al malah, Al Fatwa, p. 121-136. Abdul Razak Abdul Rahman Al –sa'adi, Manhaj Fatwa Imam Abi
Hanifah, p. 10 – 27.
Ibn qaim al Jawzi, Ilam al muwaqi'in, vol. 1, p. 25. Husain Mohamad al malah, Al Fatwa, p. 186-197. Manhaj Fatwa 3
.Imam Ahmad Bin Hanbal, p. 9 – 15

16
 his ijtihad and interpreted the text according to his understanding as a qualified and
competent scholar.

o Depending on the Arabic language in extracting the fatwa or Islamic ruling from the text,

o Connecting the branches of fiqh to the Islamic jurisprudence rules.

o Linking the investigation in fiqh with the hadith (Sunnah)

o Depending on reasoning as additional evidence to support his understanding and fatwa.

Consideration of the social dimension in his fatwa Consideration of maqasid al Shariah in his
fatwa.4

3.5.2: Technical approach in his fatwa:

In addition to the above criteria, Shawqani has some other technical methods which support his
overall methodology in fatwa which are as follows:
o Providing an introduction to the fatwa by some rules of Islamic jurisprudence related to the
subject matter of fatwa.
o Providing the fatwa in details and not in brief statements like other scholars do. The fatwa of
Shawqani therefore is detailed and explicit like a research paper rather than a very brief
statement.
o Emphasizing more on the hadith in his fatwa, and depending on it as sound proof and
evidence in supporting and empowering his Shariah opinion due to his background in hadith.
He is in fact considered as one of the distinguished scholars of hadith.5

4. Fatwa in Islamic finance

4.1 Importance of fatwa and its roles in Islamic banking and finance

Fatwa plays a crucial role in Islamic finance in regulating the market by production of Islamic rules,
Shariah standards and regulations. We can observe the significant role of fatwa in the following:
o Settle unclear issues in banking and finance by issuing Islamic ruling.
o To ensure compliance of all financial transactions with the rules and principles of Shariah.

.Saeed Bouharawa, Halima Boukrusha, Manhaj fatwa Imam shaukani, p, 15-19 4

5
Saeed Bouharawa, Halima Boukrusha, Manhaj fatwa Imam shaukani, p, 20-21.

17
 o To show the rules of Shariah by issuing fatwa when needed by the industry.
o To show what is lawful and what is unlawful in the financial transactions in banking and
finance.
o To make sure that the requirements of Islamic law are fulfilled when new products are created
before marketing.
o Obviously the marketability of any Islamic product in Islamic banking is dependent on an
approved fatwa first before launching it in the market and introducing it to the public.

4.2. Methodology of fatwa in Islamic finance:

The fatwa in Islamic finance is an extension of the development of Islamic legislation throughout
history. There is no doubt that the fatwa in Islamic finance represents part of the fatwa in Shariah.
However in order to enhance the fatwa in Islamic finance, the scholars in this field, as represented
by the Shariah advisor, should benefit from the sound methodology and accurate approach of the
schools of law and the approaches of the independent scholars of the ummah at large.

Fatwa in the area of Islamic finance has become a very vital tool due to the fast growth track of the
Islamic finance industry. The fatwa is said to be market driven due to the consistent demand for
fatwa from the relevant parties in the industry, this necessitates the establishment of a strong fatwa
methodology in Islamic finance to be adopted and implemented in issuing fatwa for various Islamic
banking and finance issues, in order to ensure the soundness of the ruling. What is greatly needed is
the structuring of a standard methodology which can provide an appropriate procedure in deriving
the Islamic ruling and fatwa according to Islamic jurisprudence discipline.. In the structured
methodology, there will be stages and technical tools that must be observed in order to issue a sound
fatwa which will realize the objectives of Shariah in Islamic finance. It is important to note here that
it is not necessary for the qualified person who issues the fatwa to be an official mufti. He can be an
independent jurist, a qualified and competent scholar or a Shariah advisor.

4.3. Some rules governing the fatwa and the mufti in Islamic finance

There are some rules and governance which must be observed and highlighted to the parties involved

18
 in issuing fatwa to the relevant parties in the industry, which are as follows:
o The Mufti/Shariah advisory must follow a clear, acceptable and accurate methodology in
providing fatwa/ Islamic ruling, It is important that prior to that he has to fully understand the
case presented to him before issuing an appropriate fatwa.,
o The Mufti/ Shariah advisory must seek easiness in his fatwa and take into account the
condition of the fatwa seekers (mustafti).
o Accommodation of the easy way in issuing fatwa does not mean changing the Shariah ruling
and dropping the weakest Shariah opinion and rules.
o The objective of fatwa is to moderate the problems by careful use of licenses.
o The Mufti/ Shariah advisory should be flexible in his fatwa by not being restricted to a
specific School of law but rather to seek the strong Shariah opinions and the appropriate
fatwa for the new case under investigation.
o If the mufti/Shariah advisory is not in a position to issue the fatwa on the spot, he can consult
other scholars and Jurist in order to have a better understanding of the case.
o It is better to have a collective fatwa through joint efforts and consultations.
o The mufti/Shariah advisory should take the task of fatwa in a very serious manner and
employ his best effort while exercising ijtihad by engaging himself very actively in
deliberating the Shariah issues.
o It must be understood that issuing fatwa can expose the Islamic banks and financial
institutions to very serious financial obligation.
o Obviously the participation of the potential investors in a business is based on the Shariah
endorsement which validates the investment from the Shariah point of view and makes the
revenue halal and permissible; therefore the accountability in front of God on the investors is
on the responsibility of the Shariah advisory.

5. Fatwa issued by Shariah board or advisory Shariah council.

This type of fatwa is under Shariah board or Shariah council, each country has a different structure
and different legal framework which govern this body. The Shariah board is legitimate control body
consist from a selected members chosen based on their background in Islamic jurisprudence, Islamic
law and Islamic finance. The principles duty of Shariah board is to ensure that the current financial
operations conform to Shariah rules, principles and regulations.

19
5.1. The area covered by Shariah advisory

The Shariah advisory exercise ijtihad and issues fatwa accordingly, therefore their main tasks is to
issue fatwa beside this task they involve as well in some other technical assignment and task in the
Islamic banks such as:
o Revising the structure of the financial products.
o Legal documentation and evidence that providers of Islamic financial services.
o Products intend to implement Shariah recommendations
o Sharing information between Shariah scholars and advisors and the institutions offering
Islamic financial services

5.2. Duties and responsibility of Shariah committee

All Shariah Committee members are expected to participate and engage themselves actively in
deliberating Shariah issues put before them. The main duties and responsibilities of the Shariah
Committee are as follows:
o To advise the Board on Shariah matters in its business operation: The Shariah Committee
shall advise the Board on Shariah matters in order to ensure that the business operations of
the Islamic financial institution comply with Shariah principles at all times.
o To endorse Shariah Compliance Manuals: The Manual shall be endorsed by the Shariah
Committee.
o To endorse and validate relevant documentations: the Shariah Committee must endorse the
following:
• The terms and conditions contained in the proposal form, contract, agreement or other
legal documentation used in executing the transactions; and
• The product manual, marketing advertisements, sales illustrations and brochures used to
describe the product.
o To assist related parties on Shariah matters for advice upon request: The related parties of the
Islamic financial institution such as its legal counsel, auditor or consultant may seek advice
on Shariah matters from the Shariah Committee. The Shariah Committee is expected to
provide assistance to them so that compliance with Shariah principles can be assured
completely.

20
o To advise on matters to be referred to the SAC: The Shariah Committee must advise the
Islamic financial institution to consult the SAC on any Shariah matters which have not been
resolved or endorsed by the SAC.
o To provide written Shariah opinion: The Committee shall prepare written Shariah opinions in
the following circumstances:
• Where the Islamic financial institution make reference to the SAC for advice; or
• Where the Islamic financial institution submits applications to Bank Negara Malaysia for
new product approval in accordance with guidelines on product approval issued by Bank
Negara Malaysia.
o To assist the SAC on reference for advice: The Shariah Committee must explain the Shariah
issues involved and the recommendations for a decision. It must be supported by relevant
Shariah jurisprudential literature from the established sources. The Shariah Committee is
also expected to assist the SAC on any matters referred by the Islamic financial institution.
Upon obtaining any advice of the SAC, the Shariah Committee shall ensure that all SAC's
decisions are properly implemented by the Islamic financial institution.

21
Key Terms
Fatwa
Shariah
Ijtihad
Fiqh
Sunni Islam
Shia Islam
Ilm knowledge
Hadith sayings of the Prophet
Matn text
Isnad chain of reporters to verify authenticity
Ra'y opinion
Fiqh jurisprudence
Madrasah religious school
Companions
Ulama,
Mufti
Sahaba companion of the Prophet,
Suhbat continuity of companionship
Tawatur continuous testimony
Ijtihad.
Qiyas
Jihād
Jurists
Iftā'.
Fiqh al‐aqallīyāt, the jurisprudence of Muslim minorities
Fiqh Council established in 1986, North America,
ECFR European Council for Fatwa and Research
Cybermuftis Fatwa‐Online
Qaḍā court judgment
Ibadat religious duties or obligations
Taqwā piety
Mushawar jurisconsults
Mawlawis men of learning
Asharq al awsat Arabic daily News Paper
Mazhab Islamic Schools of law
Ijma consensus of legal opinion
Amal ahl al madinah tradition of people of Madina
Qiyas analogy
Masaleh al mursalah Public interest
Istihsan juristic preference,
Sadu darrai blocking the lawful means to an unlawful end,
Al urf. Custom
Niyyah intention of the person
Al dalil evidence
Mustafti fatwa seekers
SAC Shariah Advisory committee

22
References
Al-Fatwa Bayna al-indibat Wa-at-tasayyub, the eminent Muslim scholar, Sheikh Yusuf Al-
Qaradawi

Syamsul ANWAR, “The Fatwa, Purification and Dynamization: A Study of Tarjîh in the
Muhammadiyah”, Paper Presented at the workshop Fatwa and the Dissemination of Religious Authority
in 20th Century Indonesia, Leiden, 31 October 2002 [unpublished].

Ahmad HASSAN, Soal-Jawab Masalah Agama, Vols. 1 and 2, Bangil, Pusstaka Tamaan

Lecture slides and presentations professor doctor HASAN LAHSASNA

ISLAMI ON LINE.NET

`UTHMAN, Kitab al-qawânîn al-shar’iyya li-ahl al-majâlis al-hukmiyya wa-liftâ’iyyah,

Bogor, Maktabat ‘Irfân, .

Noorhaidi HASAN, “Transnational Islam within the Boundary of National Politics:

Middle Eastern Fatwas on Jihad in the Moluccas”, Paper Presented at the workshop Fatwa and the
Dissemination of Religious Authority in 20th Century Indonesia, Leiden, 31 October 2002 [unpublished].

Principles of Islamic Jurisprudence by Hashim Kamali, Islamic Texts Society,

Cambridge, U.K.

Subhi Mahmassani - The Philosophy of Jurisprudence in Islam, Leiden, E.J.

Brill

Dr. Taha Jabir Al -Alwani, Ijtihad published by IIIT, USA. Abu Zahra -- Usul al Fiqh, Cairo, Dar al
Fikr al Arabi. Abdul Wahab Al Khallaf - Ilm Usul Al Fiqh, Dar al Qalam, Kuwait.
Mohammad Al Khudari - Usul al Fiqh, Dar al Fikr, Cairo

Prof. Ahmad Hassan; The doctrine of Ijma in Islam, Islamic Research

Institute, Islamabad.

Dr. Taha Jabir al Alwani: Source Methodology in Islamic Jurisprudence; IIIT,

USA.

Allama Iqbal: Reconstruction of Religious Thought in Islam.

Makdisi, George. 1984. ÒThe Juridical Theology of Shafi»i Origin and Significance of Usul
al-FiqhÓ. Studia Islamica 59: 5Ð47.

Masud, Muhammad Khalid. 1977. Islamic Legal Philosophy. Islamabad: Islamic Research
Institute.

ISLAMIC RESEARCH FOUNDATION-IRF.NET Dr.ZAKIR NAIK

23
24